I have two '07 Toyota's with Smart Key. Both have LEDs. Both LEDs illuminate when a button is pressed. As I approach either one of the vehicles only the FOB paired with THAT vehicle will start blinking as it's being interrogated by the car's entry system. Kind of cool.
Mine has the tiny LED also. The coolest thing I've found is that the interior light comes on when you approach the vehicle at night, even before you touch the door handle.